Europe's Way of Encouraging Solar Power Arrives in the U.S.

By KATE GALBRAITH
Published: March 12, 2009

John and Susan Stanton, with grandson Zachary Nadeau, at
home in Florida. - Kelly LaDuke for The New York
Times

Solar cells adorn the roofs of many homes and
warehouses across Germany, while the bright white blades of >wind
turbines are a frequent sight against the sky in Spain.

If one day these machines become as common on the
plains and rooftops of the United States as they are abroad, it may be
because the financing technique that gave Europe an early lead in
renewable energy is starting to cross the Atlantic.

Put simply, the idea is to pay homeowners and
businesses top dollar for producing green energy. In Germany, for
example, a homeowner with a rooftop solar system may be paid four times
more to produce electricity than the rate paid to a coal-fired power
plant.

This month Gainesville, Fla., became the first city
in the United States to introduce higher payments for solar power, which
is otherwise too expensive for many families or businesses to install.
City leaders, who control their electric utility, unanimously approved
the policy after studying Germany's solar-power expansion.

Hawaii, where sky-high prices for electricity have
stirred interest in alternative forms of power like solar, hopes to have
a similar policy in place before the end of the year. The mayor of Los
Angeles wants to introduce higher payouts for solar power. California is
considering a stronger policy as well, and bills have also been
introduced in other states, including Washington and Oregon.

"I'm seeing it with my own eyes - it's really having
a good effect on our local economy, particularly in these hard times,"
said Edward J. Regan, the assistant general manager for strategic
planning at Gainesville Regional Utilities in Florida. He said he had
gotten calls from other cities and states since announcing the
policy.

The new payment method is referred to as a
"feed-in tariff" in Europe. It is, in essence, a mandate by
the government telling a utility to pay above-market rates for green
electricity.

It shifts the burden of subsidizing green energy from
taxpayers, as is common in the United States, to electricity ratepayers.
And the technique includes assurances that a utility will pay the high
rates for a long period, often 15 to 25 years.

The surge of interest in the payment system is a
recognition that despite generous state and federal incentives, the
United States still lags far behind Europe in solar power. Germany,
where feed-in tariffs have been in place since 1991, has about five
times as many photovoltaic panels installed as the United States, though
they still account for only 0.5 percent of electricity in that
country.

In the United States, said Wilson Rickerson, a Boston
energy consultant, "a lot of people simultaneously reached the
conclusion - who's moving fastest internationally? And
that's definitely been Germany and Spain."

In Gainesville, the new policy has already sparked a
rush to put up panels. John Stanton, a retired civil servant living
there with his wife, put 24 solar panels on his roof in late January, as
city leaders sped the policy toward approval. Gainesville's
municipal utility will pay Mr. Stanton and other homeowners and
businesses who generate solar power more than twice the standard
electricity rate, guaranteeing that rate for 20 years.

"It was the thing that sort of put us over the
top," said Mr. Stanton, who gained an appreciation of European
energy policies after living in Italy for more than a decade.

Mr. Regan said that homeowners with panels received a
payment under the new policy that works out to more than a 25 percent
premium over the city's other incentives, which include rebates
and a more modest rate payment.

Wind power and other sources of renewable energy are
generally included in the European payment systems, but solar - as
one of the costliest renewables - has benefited the most. Payment
rates in Europe for wind are substantially lower than for solar,
according to Christian Kjaer, chief executive of the European Wind
Energy Association.

In the United States, solar panels remain
prohibitively expensive - a big reason that the panels account for
far less than 1 percent of electricity generation. Generating power from
the sun using rooftop panels can cost four times as much as coal, the
largest and cheapest source of electricity in this country.

If a utility commits to paying a higher rate for
renewable power over a period of years, it can offer those with solar
panels or wind turbines a steady return that helps defray the initial
cost of the equipment. "If you put your money in, you know
you're going to get it back," Mr. Rickerson said, referring
to Germany.

But requiring utilities to pay extra for green power
has a direct impact on ratepayers. Homeowners' electricity bills
will rise 74 cents a month in Gainesville, or about half a percentage
point of the average homeowner's monthly bill.

Opponents of feed-in tariffs like Marcel Hawiger, a
staff attorney for the Utility Reform Network in California, say that
the policy would hit poor people the hardest by raising their
electricity rates because a relatively high percentage of their income
goes to pay utility bills.

"Why should we use regressive taxation to
support the most expensive form of renewable energy?" Mr. Hawiger
asked.

The solar programs have sometimes proved so popular
that costs can spiral out of control. Last fall, blockbuster growth
forced Spain to cap the number of solar installations it would
subsidize. Ontario, which has had a feed-in tariff since 2006, also
suspended its program last year after being oversubscribed, but wants to
restart the policy.

Even in Gainesville, homeowners wanting to put solar
panels on their roof are now out of luck: a few days after introducing
the policy, the city reached its cap on solar payments for this year and
next. Meanwhile, a handful of utilities around the country are already
doing similar things voluntarily, albeit on a tiny scale.

For now, at least, solar-power advocates do not
believe they have the votes in Congress to adopt a national feed-in
tariff system like the ones in Germany and Spain. They are putting their
hopes, instead, on proposals in Congress to mandate that a certain
percentage of electricity comes from renewables.